Some base oil segments continued to see steady demand as uptake from a few downstream applications was fairly brisk while supplies were strained. At the same time, lubricant sales into a number of key segments such as the automotive industry slowed in several countries and base oil consumption therefore weakened, placing pressure on spot prices.
Aside from a slowdown in activity, the need to end the year with lean inventories to avoid tax repercussions also impacted base oil orders. Most buyers preferred to rely on term volumes and were less inclined to acquire spot barrels, as prices may be moving down on weaker fundamentals. Consumers were also concerned that they would be caught holding inventories that may lose value at a later date.
In many instances, suppliers adjusted prices down in order to capture more orders. This seemed to be the case for the Group II grades, which appeared to be generally long in Asia and were also growing more abundant at export sources such as the United States.
API Group I base stocks were generally tighter – given ongoing requirements for most grades – amid more limited output in the region compared with their Group II and Group III counterparts. Suppliers therefore stood firm by price indications for most Group I cuts, and they raised prices for bright stock.
Bright stock remained one of the cuts that has drawn continued buying interest, but production has declined in recent years, placing upward pressure on pricing. In China, for example, bright stock demand continues to outpace supply, and the country regularly imports bright stock from Southeast Asia and elsewhere. The situation has cooled slightly in recent weeks, given the economic slowdown in China and efforts on the part of domestic Group I sellers to remain competitive against imports. Over the past two weeks, however, distributors and importers increased their prices in advance of a turnaround at a Group I plant in Thailand early next year, which was expected to result in reduced regional availability, particularly of bright stock.
The turnaround at the Thai plant was anticipated to last for approximately two months and the producer was likely to build inventories ahead of the shutdown, but expectations were extra availability for spot shipments would be limited.
At the same time, a Chinese producer has made overtures towards exporting more Group I grades given a supply overhang of certain cuts. The heavy grades are typically structurally short in China and therefore more of the light grades may be offered, but the heavier viscosities experience reduced demand during the colder months of the year as well. Some of the light-grade cargoes were heard to have been offered for December shipment.
Group II and Group III supplies from domestic producers in China have grown in recent years and some of these volumes have edged out imports as more consumers rely on local products. Prices were exposed to downward pressure given lackluster buying interest against plentiful availabilities.
Even so, there were several cargoes being discussed for shipment to China, including a 7,800-metric ton lot to be lifted in Dumai, Indonesia, to Tianjin in early December and a 1,000-ton parcel to be shipped from Onsan, South Korea, to Tianjin in the second half of December. A 2,700-ton cargo was on the table for shipment from Onsan, South Korea, to Huizhou in late November. A 1,300-ton parcel was also expected to be shipped from Hong Kong to Nantong in mid November.
Another factor that has impacted Group II trade in China was the reimposition of a tariff on Taiwanese base oil imports. The sole Taiwanese producer used to export a large portion of its output to China, but has now found other outlets for its products within Asia and in the Middle East. A 6,000-ton cargo was heard to have been lined up for shipment from Taiwan to Hamriyah, United Arab Emirates, in late December.
Industry participants also expected additional turnarounds in Asia to impact Group I supplies in the region. In Indonesia, it was heard that Pertamina had started a turnaround at its Cilacap Group I unit in mid-October that was expected to be completed in the first part of November, but it could not be confirmed whether the plant had been restarted.
In Japan, Idemitsu’s Group I plant was taken offline following a fire last July and it was not likely to be resume production until the end of the year. A two-month turnaround at the Cosmo Oil unit in Yokkaichi that started in late September was expected to be completed next month, although there was no direct producer confirmation about the shutdowns.
The permanent closure of Dalian Petrochemical’s Group I plant in China before the end of the year, with the company expected to shut down the affiliated refinery by mid 2025, might also lead to a slight product tightening.
Further ahead, GS Caltex was heard to have scheduled a turnaround at its Group II/III plant in Yeosu from March to April 2025. One of Eneos’ Group I units in Mizushima was scheduled to be shut down for a three-month maintenance program in the first quarter of 2025, leading to a tighter supply scenario as well.
However, given that a number of recent turnarounds have already been completed – including one at S-Oil’s Group II/III plant in South Korea, another one at the Group I/II plant of Indian Oil Corporation Ltd in India, a second brief shutdown in India at a CPCL plant, and a turnaround at a Chinese Group II unit – expectations were that some grades would become more readily available in the region, although the producers were heard to be focusing on meeting contractual obligations before offering spot volumes.
Furthermore, Group II production in the U.S. continued at full tilt, while domestic demand slowed. Suppliers have been looking for a home for their products as they try to clear inventories kept during hurricane season, and it was heard that they had been holding discussions about potential shipments to Asia.
India typically imports substantial amounts of Group II material from the U.S. in the fourth quarter. While negotiations had been somewhat muted so far, they appeared to pick up steam and suppliers be more open to accepting lower bids. As a result, CFR India import prices for Group II grades have slipped by $5-10 per metric ton week on week.
Buying interest was somewhat dampened by abundant inventories at most lubricant plants, and the perception that domestic supplies in India were plentiful and available at competitive prices. Softer crude oil and feedstock prices also fueled concerns that base oil values may slide in the coming weeks. Import prices for Group I and Group III base oils were largely stable from a week ago on muted trading.
A few cargoes were under discussion for shipment to India, with a 3,000-ton parcel expected to be shipped from Rayong, Thailand, to Mumbai in early December. About 5,000 tons were also discussed for lifting in Shanghai, China, to India in mid December.
Other regional shipments being discussed included a 4,000-6,000-ton lot for possible loading in Yeosu, South Korea, to Dong Nai, Vietnam, and Pasir Gudang, Malaysia, in mid-December.
Crude
Crude oil futures continued to be swayed by developments on the world stage and concerns about a potential supply glut. Futures edged down on Monday after surging last week on geopolitical risks in the Middle East and Ukraine.
On November 25, Brent January 2025 futures were trading at $74.72 per barrel on the London-based ICE Futures Europe exchange, from $71.03/bbl on November 18.
Dubai front month crude oil (Platts) financial futures for December 2024 settled at $74/bbl on the CME on November 22, from $69.98/bbl on November 15.
Prices
Spot base oil prices were mixed as supply was more limited for some grades and this allowed values to inch up, while most of the other grades were steady-to-soft. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore prices were mixed. Group I solvent neutral 150 was heard to have fallen by $20/t to $780-820/t, and SN500 by $10/t to $1,030-1,070/t. Bright stock prices on the other hand edged up by $10/t to $1,300-1,340/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were assessed down by $10/t at $850-890/t and the 500N was heard to have slipped by $10/t to $1,050-1,090/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was unchanged at $650-690/t, and the SN500 was holding at $910-950/t. Bright stock prices rose by $10/t to $1,100-1,150/t, FOB Asia.
Group II 150N was heard to be lower by $10/t from the previous week at $700-740/t FOB Asia, but 500N held at $920-960/t FOB Asia.
In the Group III segment, 4 cSt was unchanged at $1,030-1,070/t and 6 cSt held at $1,060-1,100/t. The 8 cSt cut was assessed at $960-1,000/t
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.